Yields stay within range as traders eye equity markets

US Treasury yields stabilized near the middle of their recent trading ranges on Friday as government-bond investors took their cues from equity markets.

The benchmark 10-year yield was up less than a basis point at 0.6839%.

The level was well within a six-basis point trading range for the note this week and close to where it stood on Wednesday before Federal Reserve officials suggested hike rates could be years away.

The Nasdaq rose at the open on Friday, shaking off a two-day decline in heavyweight technology stocks, while worries about rising coronavirus cases and a patchy economic recovery weighed on the S&P 500 and Dow.

The small movements in Treasuries were likely driven with an eye on stocks, said Subadra Rajappa, head of US rates strategy for Societe Generale.

"There's some squaring off of positions in equities and futures, and that's probably what's driving the cautious tone in the bond market," she said.

The US current account deficit soared to its highest level in nearly 12 years in the second quarter as the COVID-19 pandemic weighed on the exports of goods and services, the Commerce Department said on Friday. The measure of the flow of goods, services and investments jumped 52.9% to $170.5 billion last quarter, its highest since 2008.

Euro zone government bond yields were edging down on Friday as expectations of more policy easing by central banks coupled with persistent concerns about economic recovery underpinned prices.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 55 basis points, roughly unchanged since Thursday's close and well above the recent low of 33 basis points on July 24.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up less than a basis point at 0.1351%.